Friday, November 1, 2013

Money Show 2013 - Roger Conrad

Roger Conrad is Founder and Chief Editor of Capitalist Times. His web site is here. His talk was entitled: "Monster Bargains from North America's Suddenly Forgotten Energy Boom".

Over the last 3 years the US had led and Canada has lagged. Canada has flat lined after 2010. Why is this? Oil is selling more cheaply in Canada than in the US. The West Texas Crude (WTF) is the North American price for oil and we are selling cheaper at the West Canadian Select (WCS) price and it is $29 lower. During the summer of 2013, the difference was only $10.

Why is this? We do not have enough pipelines to bring oil into the US. We also have cheaper gas because of inadequate pipeline capacity. Canada also has a boom in light Canadian oil besides the oil sands oil. Our production boom in gas has trailed off because the price is too cheap.

Why buy Canadian energy? The Pipeline crunch will not last forever. Values abound for the patient investor. Look for companies with strong financials. Watch the payout ratios as these need to be low. Investing in companies that have the ability to resist volatile pricing differentials is the key.

Prices will level out, but the questions is can companies survive until prices come up. Some companies are being given a premium for reduced debt. The Dividend Payout Ratios are based on cash flow.

AltaGas Ltd (TSX-ALA) has key risks in capital expenditures (CapEx) and further drilling slowdown. It is an infrastructure company and a gas utility. It is a player in renewable energy (electrical). It hit a peak in May and now there is a buying opportunity. It was an income trust and it has started to raise dividends again. It is not commodity price sensitive. The company has a solid credit rating. It is getting involved in LNG for export. It is a "picks and shovel" type company and LNG will pay off in 5 years' time. It is a low risk way to play energy.

Pembina Pipeline (TSX-PPL) has key risks of capital expenditures and energy price differentials that impact on customers, pipelines, processing stage and conventional and oil sands oil. This company is involved in a lot of areas. The Dividend Payout Ratio at 87.2% is higher than AltaGas's, but probably more stable.

TransCanada Corp. (TSX-TRP) is more than just Keystone. It is a midstream company with future spending. The southern leg of Keystone has been built. The key risks are regulatory, slower traffic and CapEx execution. It has had a recent wave of upgrades. Keystone is a political football and may not get approved and other pipelines getting approval are hiding behind this. There is trouble with pipelines going east. The trouble is with Ontario at present and Ontario is like the California of Canada. Key risks are regulatory, slower traffic and CapEx execution.

Parkland Fuel Corp. (TSX-PKI) is an expanding fuel distributor. Key risks to this company are the fuel price spreads and CapEx execution. Insiders have boosted their holdings by 6.7% in the last 12 months. This dividend is paid month. The 12 month dividend growth is 2%. The Dividend Payout Ratio is 43%. The current dividend yield is 5.4%. They have started to growth their dividends again. The net debt/cash flow is 1.13 to 1. They are generating cash flow almost equal to debt.

Crescent Point Energy (TSX-CPG) is a low cost light oil producer. Its key risks are energy prices, differentials, drilling execution risk and how "gassy" is their product. The Dividend Payout Ratio is 53%. The dividend yield is 6.8%. There is no dividend growth currently, but he feels it will happen eventually. It is a company that is doing a lot of things right. The net debt/monthly cash flow is 1.0 to 1.0. The yearly cash flow can pay off all debt.

Pengrowth Energy (TSX-PGF) is into heavy oil. The dividend has not changed since 2007. The Dividend Payout Ratio is 42.9%. The dividend yield is 7.3% and it is paid monthly. The key catalysts/risks are energy prices, the Lindbergh Project and debt. You can read about the Lindbergh Project on Pengrowth Energy's site. The debt to cash flow is 2.8 to 1. The Lindbergh project has great potential. It could come on-line at any time when the pipelines come on-line. The company has potential for growth.

PHX Energy Services (TSXPHX) is a drilling services company. It yield is 6.3% monthly. They raised their dividend in 2012. They had lowered it in 2009. The Dividend Payout Ratio is 58.18%. Key risks are drop in energy prices which will impact on drilling and equipment supply (logistics). This company converted from an Income Trust and did not cut dividend on conversion. They have no debt due until September 2016.

Brookfield Renewable Energy (TSX-BEP.UN) is the world's largest hydro/wind generation pure play. The 12 month dividend growth is 5.4%. The dividend yield is 5.1%. The Dividend Payout Ratio is 51.1%. This is a really steady company and insiders have added 18.2% to their holdings. It is a master limited partnership in the US and Canada. Brookfield Asset Management (TSX-BAM.A) owns 65%.

Atlantic Power Corp (TSX-ATP) has an endangered dividend and a dividend yield of 7.7%. Capstone Infrastructure Corp. (TSX-CSE) has an 8.1% yield. EnCana Corp. (TSX-ECA) has a 4.4% yield. Just Energy Group (TSX-JE) has an 11.3% yield. Lightstream Resources (TSX-LTS) has a 13.7% yield. Spyglass Resources Corp. (TSX-SGL) has a 13.5% yield.

Roger Conrad puts out a report on energy and income. His report has comprehensive coverage of Canadian energy income. It also covers US energy Master Limited Partnerships, US Royalty Trust, Australian energy companies, super oil and global driller and services. To get a copy email Capitalist Time or Call Sherry 1-888-960-2759.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.


  1. Thanks for posting Susan! I hold a few stocks mention, I hope they will all perform well in the future. My best stock ever is PPL, its a Derek Foster stock.

    1. I have PPL also and I have done well in this.